The honest truth about Delaware incorporation that formation services don't want you to know. Why 90% of startups shouldn't incorporate there.
"All Startups Should Incorporate in Delaware"
This advice is wrong for 90% of startups. It's perpetuated by lawyers and formation services who benefit from the complexity and higher fees. Here's what they don't tell you.
of Fortune 500 companies are Delaware corporations
But these are PUBLIC companies with complex needs
of startups ever go public
So why optimize for an outcome that won't happen?
average annual extra cost of Delaware incorporation
Money that could go toward customer acquisition
of companies reincorporate FROM Delaware every year
Because they realized it wasn't worth it
Who Really Benefits from Delaware Incorporation?
Hint: It's not your startup. Here's who actually profits from the "Delaware is best" narrative.
Makes millions in franchise taxes, filing fees, and registered agent requirements from out-of-state companies.
Love Delaware because they can charge premium rates for "specialized" Delaware corporate law expertise.
Push Delaware to justify higher fees and ongoing service charges. The more complex, the more they make.
Make guaranteed recurring revenue from every Delaware corporation that needs their services by law.
Benefit from the complexity of managing Delaware compliance alongside home state requirements.
You. The startup founder paying for complexity you don't need.
Founders Who Learned the Hard Way
These founders incorporated in Delaware based on conventional wisdom. Here's what actually happened.
Incorporated in Delaware because "that's what startups do." Spent $2,400 in the first year alone on compliance costs. Ended up bootstrapping instead of raising VC. Now wishes she had started local.
Lesson: Delaware made sense on paper, not in practice
Followed online advice to incorporate in Delaware. After 3 years of double filings and expensive agents, reincorporated back to Texas to save money. The reincorporation process cost more than just starting in Texas.
Lesson: Sometimes you have to undo premature optimization
Delaware incorporation for a service business made zero sense. Local clients, local team, local operations. Moved to LLC in home state and saved $1,500/year in unnecessary costs.
Lesson: Match your structure to your actual business
When Delaware Actually Makes Sense
We're not anti-Delaware. We're anti-premature optimization. Delaware makes sense for maybe 10% of startups.
VCs have already committed and require Delaware
Not "might want to raise" but actual term sheets in hand
You're planning an IPO within 5 years
Serious, funded path to public markets
You're building for rapid acquisition
Target company has expressed Delaware preference
The extra $2,000/year doesn't matter
You have significant funding and this cost is immaterial
• You're just starting out and following generic advice
• You "might want to raise VC someday"
• You're bootstrapping or self-funding
• You want to "look more professional"
• Someone told you "all startups incorporate in Delaware"
• You're reading this page (if Delaware was clearly right, you wouldn't be researching alternatives)
Start in your home state. Save $2,000+ annually. Keep your options open. Reincorporate later IF and WHEN you actually need Delaware's benefits.
Start Right, Not "Standard"
We help you incorporate where it makes sense for your business, not where it makes sense for the legal industry.
The bare minimum legal foundation your startup needs to get started properly.
$750
A comprehensive legal foundation that covers your business as it starts to operate and grow.
$1200
Don't incorporate in Delaware just because "that's what startups do." Make the choice that's right for your business, not the legal industry's bottom line.